Zero

A zero is a type of share or bond. Its key feature is that it pays no annual dividend, or coupon.

A zero is a type of share or bond. Its key feature is that it pays no annual dividend, or coupon. Instead, the security is issued at a discount to its face value (also known as its par value), but is redeemed (bought back by the issuer) at face or par value.

The result is the holder should enjoy a capital gain over the life of the security. This type of instrument is often issued by split-capital investment trusts some of the shares issued are 'zeros' and the rest 'ordinary'.

Zeros are tax efficient gains are typically taxed at the capital-gains tax rate of 18% and so can be useful to an investor looking to pay a big future bill such as school fees. But there are risks. If, say, the issuer goes bust, the holder may get nothing back.

Recommended

Modern monetary theory (MMT)
Glossary

Modern monetary theory (MMT)

Modern Monetary theory, or MMT, has become popular on the left, both in the UK and abroad. (Wags say that it stands for "magic money tree".) 
21 Sep 2020
Price to sales ratio
Glossary

Price to sales ratio

A company's market cap divided by the company's annual sales (or revenue) gives us the price/sales ratio.
28 Aug 2020
Too embarrassed to ask: what is a p/e ratio?
Too embarrassed to ask

Too embarrassed to ask: what is a p/e ratio?

Find out how to use the price/earnings ratio (p/e ratio for short) – a useful starting place for investors looking to value a company.
26 Aug 2020
Stock split
Glossary

Stock split

A stock split increases the number of a corporation's issued shares by dividing each existing share.
21 Aug 2020

Most Popular

The Bank of England should create a "Bitpound" digital currency and take the world by storm
Bitcoin

The Bank of England should create a "Bitpound" digital currency and take the world by storm

The Bank of England could win the race to create a respectable digital currency if it moves quickly, says Matthew Lynn.
18 Oct 2020
What would negative interest rates mean for your money?
UK Economy

What would negative interest rates mean for your money?

There has been much talk of the Bank of England introducing negative interest rates. John Stepek explains why they might do that, and what it would me…
15 Oct 2020
Negative interest rates and the end of free bank accounts
Bank accounts

Negative interest rates and the end of free bank accounts

Negative interest rates are likely to mean the introduction of fees for current accounts and other banking products. But that might make the UK bankin…
19 Oct 2020